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More On the Economy

The following was written by Julie Walsh, received by me through the Openmarket.org daily feed. It discusses some comments written recently by Peter Schiff, who also predicted the economic collapse (while everyone around him laughed and told him he was crazy).

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Watch this great video and see the scorning and scoffing of a man predicting a financial meltdown due to the housing situation.

Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn’t have a surplus, then it must come from taxes. If taxes don’t go up, then it must come from increased borrowing. If lenders won’t lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.

The good news is that economics is not all that complicated. The bad news is that our economy is broken and there is nothing the government can do to fix it. However, the free market does have a cure: it’s called a recession, and it’s not fun, easy or quick. But if we put our faith in the power of government to make the pain go away, we will live with the consequences for generations.

Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.

If we look at government market interventions through this pragmatic lens, what can we expect from the coming avalanche of federal activism?

By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices to unload excess inventory. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and significantly higher inflation.

And then tell me: If consumer confidence is needed to restore our economy, why is Congress and the President-elect pursuing a “stimulus” agenda that worsens it?

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[EagleEye: The revolution is at hand. Will you be a leader or a follower?]

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One thought on “More On the Economy”

Why don’t people want to listen to common sense?? We’ve got so many people lying to people saying the Government can “fix” our problems. If I was Governor Palin, I’d be “linking myself” to Peter Schiff. I’d be on the phone calling him, seeking his support, and asking to appear with him on interviews to talk about the Government’s role alongside his economic forecasts and analysis. This is the time for someone who is wise and seeking political credentials and his blessing for political office to “link themselves” to Peter Schiff – if he’ll allow it. I think he’s great. Thanks for sharing more. I don’t always see what he writes or says. Great to hear about it.